Wayne Swan will claw back $1.4 billion by stopping the growth in family tax payments, but only 90,000 people will feel the pain. The axe cuts more deeply into the private health care rebate generating $2 billion in savings.

Transcript

TONY JONES, PRESENTER: Where the razor gang did strike, it was less about big cuts in middle class welfare, more about close shaves here and there. Wayne Swan will claw back $1.4 billion by stopping the growth in family tax payments. But only 90,000 people will feel the pain. The axe cuts more deeply into private health care rebate with generating $2 billion in savings. Rafael Epstein reports.

RAFAEL EPSTEIN, REPORTER: For more than a decade, Labor's political rivals dominated this day and introduced family tax benefits and the baby bonus, derided by some as middle class welfare. Now the Treasurer says their growth is unsustainable.

WAYNE SWAN, TREASURER: What isn't sustainable is the growth overall in family payments. That's occurred at the height of the boom. Let me give you this fact: family payments have been increasing in the Budget faster than the aged pension payments in the last decade.

RAFAEL EPSTEIN: Family tax benefits are being hit two ways, with supposed savings of $2.4 billion over four years. The threshold of $150,000 at which the benefits start cutting out will no longer be indexed. By freezing it, the Government will ween around 90,000 people off some or all of the cash and save $1.4 billion over four years.

As well, the rate of the Family Tax Benefit will only be indexed to inflation, and not average earnings, so the Government says it will save another billion dollars.

There'll be some tough changes to pensions too. Right now, for every extra dollar a pensioner earns from other income, the Government cuts the pension by 40 cents. From September, it will claw back 50 cents in the dollar. That saves $1.2 billion.

And for those claiming the pension in the future, the pension age will rise to 67 from the year 2023. That affects everyone aged 57 or less.

WAYNE SWAN: And I know it will bring some pain and angst to some individuals. And that is why we've decided to phase it in very slowly, which is what we are doing. But this will be the first change in 100 years to that benchmark of 65 that's been in the pension system.

RAFAEL EPSTEIN: Private health changes are on the way from next year with rebates cut and higher Medicare levies. For singles earning more than $120,000 or families earning $240,000 the 30 per cent rebate disappears altogether. And there are cuts to the rebate for any single person earning above $75,000 or families above $150,000. And among the Medicare levy increases, those on as little as $75,000 a year without private cover will for the first time pay a one per cent surcharge.

NICK XENOPHON, INDEPENDENT SENATOR: I think that that could well be counter-productive that you could see a situation where you will have more people dropping out of private health insurance, increasing premiums and more people going onto the public system. And that, to me, could well stretch any already stretched public system.

RAFAEL EPSTEIN: The big spending on infrastructure tends to focus on emissions intensive industries. Roads and ports projects get around $4 billion, carbon capture and storage gets $2 billion. By comparison, solar gets $1.5 billion and renewables get just half a billion dollars. All over those figures over next six to nine years.

DON HENRY, AUSTRALIAN CONSERVATION FOUNDATION: This historic level of investment into solar power and public transport is really good for our planet, good for our cities and good for jobs.

RAFAEL EPSTEIN: The public broadcaster also received a funding boost.

MARK SCOTT, MANAGING DIRECTOR, ABC: We're looking at an extra $167 million over the next three years, a very significant increase to our base funding and we'll be able to do a lot with that additional funding.

RAFAEL EPSTEIN: The bulk of the initial funding will go on TV drama. Rafael Epstein, Lateline.